Mahatma Gandhi once said that “India lives in her Village”. This stands true today as well. Rural India is two-thirds of a country of billion plus people, living in 6,40,867 villages in India according to 2011 census. Rural population is considered as a huge contributor in Indian economic growth The most important thing about the rural economy is that it is very large, almost co-terminus with the Indian Economy. Rural economy is composed of many and large variety of economic activities. Growth of rural economy depends on various industries established in rural areas. Rural segment is growing at a healthy pace of 8-10% per annum and is expected to add US $ 100 bn in consumption demand by the end of this year.
The rural economy in India is wholly agriculture based and it is of tremendous importance because it has vital supply and demand links with the other Indian industries. Agriculture is the main stay of the Indian economy, as it constitutes the backbone of rural India which inhabits more than 70% of total Indian population. Today, the rural economy in India and its subsequent productivity growth is predicated to a large extent upon the development of its approx 800-million strong rural population. The Ministry of Agriculture, the Ministry of Rural Infrastructure, and the Planning Commission of India are the main governing bodies that formulate and implement the policy related to rural economy in India and its subsequent development for the overall growth of the Indian economy.
India has come a long way in modernizing its economy, reducing poverty and improving living standards for a large segment of its population. In developing rural economy many sectors as well as many initiatives taken by the government are in the areas of employment generation, easy access to finance, exemption in agricultural incomes, infusion of funds to help underserved sectors like MFIs, cleantech, renewable sources, online payment etc.
In recent times, many MNC companies, PE/VC funds, AIFs have started investing in rural sector and contributed for the growth of rural economy. Telecommunication players have also played a critical role in terms of connecting rural with urban areas especially with their internet services. Still it is a long way to go for reaching out to the last mile. Online portals are being viewed as key channels for companies trying to enter and establish themselves in the rural market. Market research firm Nielsen expects India’s rural FMCG market to reach a size of US$ 100 billion by 2025. Another report by McKinsey Global Institute forecasts the annual real income per household in rural India to rise to 3.6 per cent 2025, from 2.8 per cent in the last 20 years.